With tuition and room and board approaching $45,000 per student, one would think it was more than enough to support the continuing operations of Fairfield University.
On the contrary, nearly 7 percent of the current budget for the 2007-2008 academic year comes from another source: the University endowment.
The endowment, valued at $214.8 million as of Dec. 31, 2006, grew over 50 percent in the previous two-year period. This nearly $77 million growth was comprised of $4.3 million in new gifts, with the remaining growth a product of investment gains and budget excess reinvestment.
This growth rate, annualized to 24.8 percent per year in the period, out paces many schools generally perceived to be in competition with Fairfield, such as Boston College, Villanova University, Providence College and Fordham University.
Fairfield, like many universities, uses endowed funds to supplement tuition and other fees in funding operations. Endowment dollars are raised initially through gifts, then also acquired through investments managed by the Finance Committee of the Board of Trustees and, specifically, Vice President of Finance Bill Lucas.
Gains on these investments are partially used to continue increasing the fund, while approximately 5 percent of net assets are used to support the budget, allowing the principal funds to remain intact.
These funds support various University programs, though according to Lucas, the “majority is utilized for student financial aid and academic programs.”
In the past four years, endowment funds have grown from less than 5 percent of the budget to a projected 6.8 percent, or about $3,000 per undergrad this year, and should continue to grow as the University builds the endowment. Such increases allow diversion of at least part of the rapidly rising costs of running the University from being absorbed by greater tuition increases.
Much of this gain can be attributed to an investment strategy that has, in the three-year period from July 1, 2004 to June 31 of this year, beaten all three major equity indices in returns: the Dow Jones Industrial Average, the S’P 500 and the NASDAQ index.
These gains are accelerated by the fact that Fairfield, a non-profit organization like most universities, does not pay capital gains taxes like individual taxpayers, allowing Fairfield to “reinvest all net capital gains back into the endowment, which enhances the overall portfolio return,” according to Lucas.
While maximizing return is important to the fund, the University – as a Jesuit institution – also holds in high importance investing in a socially responsible fashion. According to the endowment policy, the strategy must involve “excluding … securities of firms whose policies are inimical to the values the University espouses” and “investing in firms that demonstrate a high level of social concern.”
While the growth of the endowment is encouraging, the overall size of the fund pales in comparison to many older universities. Harvard, which has the largest endowment in the country, tops $25 billion, while Boston College tops $1.4 billion.
This is to be expected, given the size of Fairfield, with under 4,000 undergraduates, and the young age of the University, having just recently celebrated its 65th anniversary.
Though the overall size of the endowment is not up to the level of Boston College, it is still greater than schools such as Loyola College and Bentley College, and has more endowment dollars per student than schools including Villanova University and Fordham University, both of which are 100 years older than Fairfield. Given these factors, the future of the endowment looks promising.
Lucas acknowledged that the relative difference in the endowment size is “primarily because of the young age of the institution and alumni,” which should improve over time.
Bill Calagy ’08, CFO of the student-run Fairfield Investment Group, also anticipates notable gains in the future for the fund.
“I feel our endowment, based on our University’s age and relatively small size, has done extraordinarily well and will be a tremendous asset in the future,” he said.
“Considering the success of future students coming out of the University, and its relative location to the financial centers of Greenwich, Stamford, White Plains and New York City, the endowment should receive sizable donations in the coming years,” he added.
But for most students, the endowment only means so much. Nick Carlucci ’10, when asked how important the growth of the endowment was to him said, “I don’t really get how it works, but anything that keeps my tuition from skyrocketing faster is important to me.”
Look for the second part to this story in next week’s issue.
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